International

PayPal Goes To China (And Back)

If there’s anything from PayPal’s latest report on the Chinese consumer and their cross-border shopping patterns that really surprised Melissa OMalley, Director of Global Merchant and Cross-Border Trade Initiatives, it’s likely the statistic that over half of online shoppers are planning to begin or increase cross-border shopping, which she feels has to be a motivator for U.S. merchants to get on board.

“If the rest of the data isn’t convincing enough,” she remarks, “I think that when you look at the intent to buy, as well as some of the previous research that we’ve done that shows us that cross-border shoppers spend twice as much as a domestic shopper, [Chinese consumers] are…really valuable…for merchants to court and to nurture.”

Yesterday (July 28), PayPal released “Get to Know Your Chinese Cross-Border Buyers,” a research report (done in conjunction with Nielsen) that is focused on Chinese consumers wanting to buy from U.S. retailers. In advance of the news, MPD CEO Karen Webster caught up with O’Malley to discuss the findings of the report.

Beyond examining the data proving out the opportunity that exists for U.S. retailers to sell in to China — which itself is fairly eye-opening — O’Malley also provided insights in the Chinese cross-border buyer (as well as online shoppers in other countries) that could help retailers in the United States focus their strategies for exponential growth in cross-border sales.

In building its China Connect program, PayPal had previously done research on the opportunity in China for U.S. merchants. The “Get to Know Your Chinese Cross-Border Buyers” report, O’Malley explains to Webster, is a “deeper dive” into understanding what drives the purchasing decision for a Chinese consumer online.

The company set out to answer questions such as: What are Chinese consumers looking to buy from the United States? What types of things do they ultimately purchase? What are the mitigating factors in that decision (value, price, authenticity)? And how are Chinese consumers buying from U.S. retailers — what is the path to purchase?

Singling out one particular statistic in the report — that 74 percent of Chinese online adults have made an online purchase from a U.S. retailer — Webster calls it “stunning,” and O’Malley agrees.

She attributes it to two things that Chinese consumers want more than anything else when they go shopping online: product quality (at 55 percent) and authenticity (53 percent).

Consumers in China know, says O’Malley, “when they can purchase directly from the United States, not only are they going to get a high-quality product, but the product will be authentic.” This knowledge is particularly reassuring compared to their experiences with domestic marketplaces in China, many of which are plagued with incidences of product counterfeiting.

These insights influenced the extension of a couple of “core” PayPal features to the Chinese market to get consumers over the “hump” of buying online from an overseas merchant: Buyer Protection and Seller Protection is now available to Chinese consumers for both physical and digital goods.

“Pretty much almost everything is covered,” says O’Malley, “with the exception of things like real estate or custom-made items.” The service also includes free return shipping for cross-border purchases.

But is China really a market where PayPal can play? After all, China is the land of Alipay. Yet, according to the PayPal survey, 35 percent of Chinese cross-border buyers surveyed reported they used PayPal in the last 12 months, making it the second most-used method of payment behind Alipay.

“Everybody knows that Alipay is a very strong domestic payment option in China,” observes O’Malley. “But when you’re looking at cross-border payments, a lot of that [decision] falls to the merchant” — who, the numbers would appear to bear out, is likely to prefer PayPal (which a UnionPay customer in China can link directly to his or her credit or debit card).

And, on that score, as a result of PayPal’s partnership with China’s UnionPay International — allowing the latter’s 4.7 billion cardholders to pay with PayPal — a merchant that previously couldn’t accept Chinese debit cards or credit cards now has “an easy way,” says O’Malley, to start accepting orders from people in China without worrying about credit card fraud or similar inhibitors of overseas sales.

O’Malley says that, unlike a lot of other companies in the space, which are either merchant-focused or consumer-focused, PayPal, plays “in both of those ballparks,” and therefore has an interest in making the purchase process easier on both sides.

She also shared her observations about just how different the path to purchase is for the cross-border Chinese consumer — starting with the fact that often the shopping journey starts at their bank. Specifically, in the case of UnionPay International’s “Shop the World” website, people go to their banking portal to shop online where they find names and brands they trust from an intermediary they also trust: their bank.

What gives PayPal users in China “peace of mind,” says O’Malley, is that the company — even via the UnionPay site — is facilitating deals with known and trusted merchants, with the purchase being carried out directly on those merchants’ websites.

But like any other consumer, what Chinese consumers are buying is apparel (perhaps unsurprisingly) related to “leisure and hobbies.” O’Malley said that sporting goods fall into that category, noting that “skiing is hugely popular in China right now. And most of the top brands, if you think about it, in leisure, sports and hobbies, tend to be U.S. or European brands” — which would explain the boost of overseas purchases from China.

Other popular merchant categories include vitamins and children’s (and baby) products, a trend O’Malley associates with recent scares related to tainted goods in China. Parents in China who have young children, she says, “have a very large propensity, online and overseas, for things like vitamins and children’s products,” and they obviously want those products to be safe.

Webster points out that a different aspect of safety — financial — is highlighted in the PayPal report as a driver for purchasing.

To this point, O’Malley explains that, beyond removing the barrier of consumer concern implicit in sharing credit card information online — especially with an unfamiliar merchant — PayPal also addresses safety concerns on a macro level.

“It’s more than just a credit card-detail question,” she tells Webster. “It’s about the entire purchasing process, and making sure that you’re going to be a satisfied customer, whether or not you end up keeping the item.”

In general, O’Malley reports that PayPal’s China Connect program is “going really well” — sharing, for example, that she recently spoke with a number of PayPal merchants about their preparations for November’s Singles Day (a major online sales holiday in China).

She adds that PayPal has had success in bringing on merchants not just from the U.S., but other countries, as well, singling out Germany as “a very successful market for us in terms of merchant interest.”

With merchants always seeking incrementally, as Webster observes — new customers and more spend from existing ones — it would appear that the Chinese consumer and their interest in shopping with merchants outside of their home fulfills that goal in equal parts.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

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